The Canada Revenue Agency (CRA) was asked to comment on several scenarios involving the sale and deemed sale of a property co-owned by a couple.
Two common-law partners, A and B, purchased a condo as a principal residence. When A renewed the mortgage debt on the condo, B’s name was struck off from the title without anything being paid to B as a consideration. A and B had a tacit agreement under which they owned a share of the condo and would share in the same proportion any related gain from its sale. During the ownership both A and B contributed to the running costs and remained common-law partners and lived in the condo until the time of its sale.
In their response the CRA commented on the effectiveness of the agreement, the tax implications of an actual sale and a deemed sale on death.
Because a relationship is a question of fact, the CRA would consider all relevant information to determine the nature of the relationship. A and B would have to prove the existence of the tacit agreement. The CRA added that common law principles would be used to determine the ownership rights of A and B in the condo.
The discussion on the tax implications of an actual and deemed sale will continue on my next blog.